Ch. 2-1 Deductions from Gross Pay

Which of the following describes how to calculate net pay?

• Subtract the total deductions from the net pay.

• Add the total deductions to the gross pay.

• Subtract the total deductions from the gross pay.

• Subtract the total deductions from the take-home pay.

Workers may claim one withholding allowance for which of the following?

• themselves

• their spouse

• each child or dependent

• all of the above

Which of the following statements about Social Security & Medicare taxes is NOT true?

• The Social Security tax rate of 6.2% is applied to a maximum wage of $102,000.

• The taxes are used to provide disability, retirement, and survivors' benefits.

• The taxes are used to provide hospital insurance for some disabled people and for people over 65.

• none of the above

A withholding allowance is used to reduce the amount of tax withheld from each paycheck.

• True

• False

The amount of money deducted from worker's pay for federal income tax is called withholding tax.

• True

• False

After all deductions are subtracted from total wages, the remaining amount is called spending money.

• True

• False

Gross pay minus all deductions are subtracted from your wages is called net pay, or take-home pay.

• True

• False

A deduction is an amount of money ADDED to gross pay.

• True

• False

How much Medicare tax at 1.45% is deducted from $620 in gross wages?

• $8.99

• $10.99

• $89.90

• none of the above

Lindsey Banks is a Senior who earned $3,500 working at the local bakery. Her employer deducted $380 in withholding taxes. She has no adjustments to income or additional income. Her parents claim her as a dependent on their tax return. How much will Lindsey receive as a refund?

• $380

• $3,500

• $1

• none of the above